For the past month, WTI crude oil prices have averaged $49/bbl, trading within a relatively narrow $7/bbl range. Two years ago, this price would have been devastating for producers, but not so in late 2016. The crude directed rig count is up by 127 since May, +11 just last week. U.S. crude production is down about 1.2 MMb/d since April 2015, but over the past three months has stabilized at 8.5 MMb/d. On the gas side, since the second quarter of 2016 a combination of lower natural gas production and higher demand (from the power, industrial and export sectors) has worked off a big inventory surplus. Consequently, U.S. natural gas prices are up more than 70% since March, even considering the big price drop over the past week. NGL prices are at the highest value relative to crude for any October since 2012. Is this it? Is this what a Shale Era recovery looks like? In today’s blog, we consider a possible road map for the next couple of years. Warning, we have also included a short infomercial for RBN’s School of Energy next week in Houston.
The abyss was the first quarter of 2016, and it looked like the blue bar in Figure 1. Oil, NGLs and natural gas are shown in $/MMbtu on the left scale, and in $/bbl on the right scale. On February 11, crude dipped to $26.21/bbl. Two weeks earlier, the basket of NGLs hit rock bottom––$3.22/MMBtu, or about $13/bbl. In March, natural gas dropped to $1.64/MMBtu.